Budget 2015- Will it chart out a new narrative?

Union Finance Minister Arun Jaitley with chief economic adviser Arvind Subramanian during the pre-Budget discussions with industry and trade groups at North Block in New Delhi on Tuesday. (PTI Photo by Subhav Shukla)

There are 30-odd Islamic Republics world over. Not one provides subsidy to its citizens for travelling to Haj. We the Secular Democratic Republic of India does it. Constitutionalists who otherwise quote our sublime Constitution at the drop of the hat when it comes to pontificate the majority community remain silent on this Constitutional perfidy by the Union Budget year after year.

The issue is not the amount involved. Nor are we discussing the Constitutional propriety – how can a secular non-denomination State intervene and fashion religious preferences of individuals? How can Government provide financial assistance to a denomination while positively discriminating against the others? Would this have received the approval of our founding fathers? Before the reader hastens to conclude that this is a “communalist rant” let me hasten to add it is not.

The issue, let me assures readers, is far more serious – it is the mindset of the Indian establishment. As a “Socialist” nation, Government of India feels compelled to intervene almost at every single aspect of individual choice or preference. It believes that it has a Constitutional mandate to intrude and decide on our savings pattern or determining on when, where and how much we should invest.

In short, Government in its collective wisdom knows what is good for you and me. Crucially, by tweaking a rule here or re-writing a regulation there the Government feels that it can usher large-scale changes in our lifestyle. As a natural fallout, we the people of India too are guilty of scrupulously believing that Government has a magic bullet to cure all the ills plaguing our economy.

Consequently, the State over the past 60 years or so has emerged as the sole arbiter in Indian polity, society, economy or for that matter in every aspect of individual and by extension the national character. This idea of a “compulsive-corrosive-interloper-arbitrator” State is central to the Nehruvian narrative post-Independence.

What is interesting to note here is that Indian growth story post-Independence is in spite of this narrative – and definitely not because of it. That explains why socialism failed in India and was given a silent burial in the early nineties.

Little do we realise that this debate [and the resultant experiment on India] on identifying the role of Government and the insistence on providing it a central role cost us four valuable decades. A generation was lost. Countries that were ranked below us in the development index zoomed ahead of us.

Well the idea is not to be counter factual at this distant point in time and ask the oft-repeated question – what if. However, what should not be forgotten in the melee is that the central idea of reforms in the aftermath of expected but early demise of the idea of socialism in India runs contrary to the Nehruvian narrative of an omnipotent omnipresent state.

Change the central ideaBut does the Government think so? The answer to this question is that no Government or political party believe that the State has a limited role to play in the Indian context. On the contrary they presume that they have a dominant role and hence have to necessarily play the role of an interventionist – which is a popular yet an absurd idea of Government in the Indian context.

Once reduced to playing the role of anything but a facilitator the Government by its very design becomes a hostage to various groups that seeks intervention of the Government. This explains substantially if not wholly why the Government provides Haj Subsidy.

This also explains why Government believes that its job is to distribute food and notfacilitate farmers in growing more grains. It believes it must provide more doles and not provide an atmosphere that creates employment opportunities. To sum up, at every turn the government takes an easy, popular and an escapist route rather than working out an effective solution. As a natural fallout, Government assumes that it must be seen at every place – whether it is effective or not is immaterial. This needs to change and change it must forthwith. The challenge for Budget 2015 is to make Government efficient.

For that the essential idea that Government is a “compulsive corrosive interloper arbitrator” to everything and everyone needs to change dramatically.

Mandate 2014 That invariably takes me to Mandate 2014.

The then incumbent UPA Government believed in grandstanding and posturing, in outlays rather than outcome; in allocations than in delivery. The net result: we are overloaded with legislations where the State is incapable of providing the promised solutions. And it fails, little does it realise, it erodes the confidence of the people on Government.

If people did not have food or if India suffered from malnutrition, the UPA Government believed that all it had to do was to legislate the Food Security Act. Nothing needs to be done further – the legislation would take care of hunger by itself. The response to tackle the issue of illiteracy is equally hilarious – amend the Constitution and make right to education a Fundamental Right.

The question that needs to be posed is whether such voodoo economics succeeded in India in the past? Whether such ideas have ever been found to be sustainable over an extended period of time in any other country?

The answer to such questions is a clear no. Obviously, to distribute food we need to grow more food. But if we thought malnutrition is a by-product of faulty distribution but not sufficient production we are plainly wrong. If we thought our illiteracy can be tackled through increased allocations again we are plain wrong. In my previous columns I had dealt on several aspects of the Indian economy in the run-up to Budget 2015 where I have concentrated in both increased production and productivity – the grand idea of India. This in quintessence is how one should interpret mandate 2014.

More specifically as the new revised statistical GDP data reveal our national growth is a function of the growth in small-and-medium enterprises – most of which are below the radar of the Government. For those who are politically tuned – most of these businesses are run by the Backward Castes, Scheduled Castes and Tribes. Yet when did we last hear the Government have a specific programme for such business? Where is the question of a programme when most of these business are not even available for statistical purposes with the Government?

Reforms since 1991 have been in driblets and without conviction. It has not posed a fundamental question on the role of Government. And whenever it has, it has at best favoured the large businesses and those in formal sector at the cost of others. The real reforms is to free the entrepreneurial genius of this country from the influence of the Government.

To do this, the Government must identify and repeal Legalisations that are outlandish, meaningless and of course have a corrosive influence on the functioning of our economy. Labour laws are one which has neither benefitted the labour nor the industry. In the game of playing arbitrator between the industry and labour, the Government has been found playing cat amongst warring monkeys.

The national employment guarantee scheme is a noble idea – provided you use your heart not brain to think about macro-economics. A sum of Rs 40,000 crores spent annually on opening and closing pits across the country is nothing but voodoo economics. If only this amount is spent more purposefully for the past decade or so with the Government assuming a more functional role, India could have been far better placed than it is now.

Most politicians believe such hard-headed economics does not get them votes in the short run. But believe me it pays in the long run. Importantly, mandate 2015 was very uni-vocal–no to such reckless economics. Mercifully elections to 2019 are far away. Finance Minister must realise that the mandate of 2014 was for a ruthless roll back of Government itself.

And that implies he must not tinker with allocation to MNREGA. Rather, he must bury it fathoms deep. He must not provide ad-hoc tax incentives to set up industries in select areas. Rather, he must simplify tax laws and have a benign rates without any exemptions. He must not increase outlays education but understand there are a billion ways of improving outcomes in this sector without increasing outcomes.

If the Government incrementally Budgets for 2015 – it is an economic disaster. Rather, it must Budget afresh. For starters, it has to do away with the Nehruvian mind idea of a State. Secondly, it has to ensure that Government has stops playing the role of compulsive interloper arbitrator for too long. Finally, the Government has to do away with a host of Legislations that rolls back the very presence of the Government.

Finance Minister is presented with a once in a life-time opportunity. Will he seize the once in life-time opportunity and do the needful? Will he roll back the Government? How about doing away with Haj subsidy too?